Minneapolis, MN · Member since 2013 · 7 posts · 0 votes
To All,
I have an investment residential property that I have been renting out for the past few years. Just recently I formed an LLC and transferred the property to it. My next step is to "assign" the existing lease agreement (that I have in place with the current tenants) to the LLC. Does anybody know of a good document, form or verbiage for this kind of assignment.
This is fairly cosmetic I believe. Since you owned the property and then vested in the LLC the LLC simply is the successor in interest to the lease agreement. You do not really need to pledge the rents to the LLC, they have the package of rights which includes the right to the rents when the property transfer.
What are you trying to accomplish?
@Steven Hamilton II would know if there is any tax implications which require such an assignment. @Bill Gulley might have some alternate insight to the matter as well.
I would suppose if anything is needed, simply marking up the existing lease agreement with the tenant to amend the landlord name would suffice. Change names and both parties initial the change.
You already transferred the rents and lease when you deed the property to the property, they run with title. All you need to do is notify the tenants that you assigned your property and to make payment to the LLC. Just tell them their lease is in effect and that the transfer does not effect them at all. When the lease expires make new ones in the name of the LLC.
Steve can explain taxation, that depends on how you transferred it, your tax election and state transfer taxes, if any. :)
I have an investment residential property that I have been renting out for the past few years. Just recently I formed an LLC and transferred the property to it. My next step is to "assign" the existing lease agreement (that I have in place with the current tenants) to the LLC. Does anybody know of a good document, form or verbiage for this kind of assignment.
There are no tax ramifications unless your LLC is anything other than a disregarded entity. Who owns the LLC? If it is you AND your spouse you have problems as it is taxed as a partnership, the lease does not have consequences; however, you will be required to file another tax return for your LLC.
Does your start have transfer taxes on the transaction? Those would be an expense for the property.
The lease stays in effect despite the transfer of the property.
sorry it has taken me so long to say "thank you" for your replies and sharing of knowledge. To answer some of your questions:
My wife and I own the investment property. We used a quit-claim deed. I agree that notifying my tenants of the transfer to our newly formed LLC, assuring them everything in the existing lease is still in effect, and for rent payments to be made to the LLC should be sufficient.